Heat up on insurance agents

Life insurance agents are probable to face difficult times.
The regulator has planned to make the norms for selling policies more stringent, while insurers are planning to update their tied agent force to increase productivity as their limits have come under pressure following rule changes over the past 12 months.
The insurance regulator has projected to amend the IRDA Regulations for Protection of Policyholders’ Interests so that the policies are sold based only on the need of the buyer.
The IRDA wants to make it compulsory for agents to prepare a “need analysis document” before selling a policy. “There should be a proper monitoring of implementation of the need analysis by insurers of all the intermediaries they deal through,” the regulator said.
It also said the training set of courses for agents should give high priority to the need analysis. “The regulatory changes will shake out the 30-lakh plus agency force in the life insurance industry,” said Shekhar Bhandari, business head (tied agency), Kotak Mahindra Old Mutual Life Insurance Company. “Not all of them will find it simple to stay in the business.”
According to Bhandari, insurers are feeling the heat of the changes in Ulip charges and others. “In 2008-09, insurers have rationalised their administrative and operating costs and expenses. We’ll have to focus on increasing the productivity of distribution channels,” he said.
Tied agents — entities selling products of one company — is the costliest sharing channel for an insurer. “Agents should now understand that they need to pull up their socks and get double the business to earn the same level of commission they had been earning so far,” Bhandari said.
Birla Sun Life Insurance Company’s chief financial officer Mayank Bathwal spoke along parallel lines. “Agency productivity has to be increased. Besides, an insurer also should look for innovative distribution channels which cost lower.”
The pending Insurance Bill also does away with Section 40A of the Insurance Act that prescribes commission. At present, an insurance company, which is yet to complete 10 years, can pay a maximum of 40(%) per cent commission on the first year premium income, 7.5(%) per cent on the renewal premium income for the second and third years and 5(%) per cent thereafter.
Insurers who have finished 10 years can pay a maximum 35(%) per cent as commission on the first year premium income, 7.5(%) per cent for the second and third years and 5(%) per cent thereafter.
For single premium policies, the commission is 2(%) per cent and it is 7.5(%) per cent for pension plans.
After the insurance regulator has put a cap on Ulip charges, the commissions in an Ulip become less than in a traditional plan.